The report described the results of the “Virtual Markets Integrity Initiative” launched inApril earlier this year,afterthe AttorneyGeneral named ‘Eric T. Schneiderman’ sent letters to13different digital exchanges, requesting brief infoon their operations, internal controls andotherkeyproblems.
The move was takenso asto clearaverage investors vision witha much betterunderstanding of the related risks and protections revolving around the crypto trading platforms, moreoveradditionallyto increase the transparency barrier.
The recent report examines the practices of around10crypto trading platformsprimarily basedwithin theU.S. and abroad,additionallyalong withcollecting data by theAttorneyGeneral’sworkplaceregardingthe state of digital currency markets asa whole.
The study revealed that the absence of acceptedstrategiesfor auditing virtual assetsleads toa uniformandtransparentapproach toindependentauditing digital currencylistedon exchanges. This puts customers’ fundsstored onto their exchange accountsin dangerof attacks from hackers orthieving. The reportafterwardsqueriesthe problemof public protectionand therefore thesufficiency of thebusinessinsuranceto hidepotentiallosses.
The reportadditionaloutlines abusivetradingpractices,focusingthatthe majorityof cryptotrading platforms deployautomatictraders,providingthem special conditions,thatleaves retail customers atan obstacle. Itconjointlystates that digital currency exchanges involvevaried, overlapping lines of business that represent serious conflicts of interest. The report further explains:
“Automatedtradingactivitiesmayconjointlyenableonetraderorclusterof traders to command multiple accountsat the same timeto obscure coordinatedtrading,so asto manipulatecosts.”
The report notes, thatmanyof the investigated platforms trade their own account in volumes thatconjurea big portion of totaltrading.Manyenabletheirworkersto trade on their venue,thatraises doubtsregarding exchanges’ effortsto make sureworkersdon’tusepersonalinformationto geta bonusoveralternative traders. However,a number ofthe platforms issue their own crypto currencies orsettle forcompensation in exchange for listing a virtualassetto trade.
“Though some virtual currency platforms have taken steps to police the fairness of their platforms and safeguard the integrity of their exchange while there are still several left whohaven’t. Platforms lacksturdyperiodand historical marketinspectioncapabilities, like those found inancienttradingvenues,to spotand stop suspicioustradingpatterns.”